Wednesday, March 31, 2010

Singapore has the biggest income gap among developed nations. Instead of treating this serious problem with priority, our PM trivialises it by saying it is not important:

"What's important is not the absolute gap between the top and the bottom, but whether those at the bottom are being helped to move up. Prime Minister Lee Hsien Loong made this point at a dialogue yesterday with contributors to the Government feedback" - Straits Times Article, A lot done to help needy : PM

A lot done to help the needy? Bottom helped to move up? We not only have the biggest income gap, the PAP govt is also doing the least for poor people among all developed countries by any measure - social safety nets, unemployment benefits, welfare, etc. So PM Lee's govt failed to live up to his own assertion that what is important is helping the poor - since Singapore's inequality is the highest, help for the poor should also be the highest but it is actually lowest among all developed countries. This is something like his justification for GST - GST is to help the poor (by taxing them?)....saying one thing and doing another. His policy to import cheaper foreign labor in large numbers is a major factor in depressing the wages of the lower income. Singapore has no minimum wage, independent unions and during his leadership, we saw retrenchment benefits & healthcare benefits for lower echelons in the civil service disappear. He increased his ministers' pay which was already the highest in the world to new record levels. It is obvious that he cares little about the large income gap and will not be adopting policies to bring about greater equality in our society.

"'Supposing the world's richest man, Carlos Slim, comes to live in Singapore. The Gini coefficient will get worse. But I think Singapore will be better off. Even for the lower income Singaporeans, it will be better," - PM LeeCarlos Slim? If Carlos Slim comes to Singapore, every good thing he does will cause the Gini to fall and every negative thing he does for ordinary Singaporeans will cause the Gini rise. If he comes to Singapore and gives a large part of his wealth to the poor here, the Gini Index will fall instantly. If he comes here with 100,000 low cost workers from Mexico hiring no Singaporean in his business it will depresses the wages of our workers, the Gini Index will shoot up. If Carlos Slim comes here with 10,000 rich relatives and start snapping up property using his billions, that will drive up the cost of living for ordinary Singaporeans and cause wealth of richest Singaporeans with multiple properties to go up, thereby increasing the Gini. PM Lee does not even understand his own example....------------------Home > Breaking News > Singapore > Story Mar 27, 2010A lot done to help needy: PM By Sue-Ann Chia , SENIOR POLITICAL CORRESPONDENT

WORRIED about income inequality? What's important is not the absolute gap between the tops and the bottom, but whether those at the bottom are being helped to move up. Prime Minister Lee Hsien Loong made this point at a dialogue on Saturday, in response to a question on income inequality in Singapore. 'Supposing the world's richest man, Carlos Slim, comes to live in Singapore. The Gini coefficient will get worse. But I think Singapore will be better off. Even for the lower income Singaporeans, it will be better,' he said. This is because people like Mr Slim, a businessman and philantrophist, could start businesses here and create more jobs and prosperity for Singaporeans. The Mexican tycoon heads this year's Forbes list of the world's top 100 billionaires. He beat Americans Bill Gates and Warren Buffet. The Gini coefficient measures the income distribution within a country. Singapore's has been inching up in recent years but government aid measures have also brought it down somewhat. Mr Lee pointed out: 'What really matters is whether we can benefit the low income Singaporeans so that they have a decent standard of living, and hope for a better future, for themselves and their children.' Read the full story in tomorrow's edition of The Sunday Times.Back to top

Tuesday, March 30, 2010

I'm going to disable comments for this one because somehow I know what some of you are going to say. Treat this as a general knowledge posting to foster greater understanding of the teachings of some of our (mega) churches.

"Prosperity theology (also known as prosperity doctrine, the health and wealth gospel, or the prosperity gospel) is a religious belief found among "tens of millions"[1] of Christians centered on the notion that God provides material prosperity for those he favors.[2] It has been defined by the belief that "Jesus blesses believers with riches"[1] or more specifically as the teaching that "believers have a right to the blessings of health and wealth and that they can obtain these blessings through positive confessions of faith and the 'sowing of seeds' through the faithful payments of tithes and offerings."[3] - Wikipedia, "Properity Theology".

I guess that if you have faith, every single good thing that happens to you has to be a gift from God. My browser crashed when I typed this post...hmmm....

The average amount a person on pension draws when he retires is >50% of his last drawn salary in other developed countries. A Singaporean would draw between 8% to 26% of his last draw salary (See report below) according to a research paper by Ng Kok Hoe. The reason for this? 68% of the of annual CPF contribution is spent on housing and 18% on health leaving only 14% for pensions.

Remember in Nov 2009 Mercer reported that the CPF is poorly ranked for inadequacy, and a govt expert came out to defend the CPF? [Link]. The govt expert's defense of the CPF was that home equity can be unlocked to achieve adequacy[Link]. Minister Balakrishnan recycled this argument in yesterday's debate with Ng Kok Hoe. This argument is incorrect because other countries don't require its retirees to lose their home to raised funds for retirement...and the fact that Singaporeans have to mortgage or sell their homes in order to retire properly reinforce the point that many netizens have raised that the cost of housing is too high in Singapore and it will lead problems later on. If home prices become unsustainable due to an ageing population which we will inevitably face, we will see a decline in home equity which will worsen the retirement problem.

THE workings of the Central Provident Fund (CPF) and whether it provided enough for retirement fuelled a spirited debate at Monday's inaugural Ee Peng Liang Seminar on Aged.The spark came from a paper presented by National University of Singapore (NUS) social work graduate Ng Kok Hoe, which highlighted that a Singaporean would draw between 8 per cent and 26 per cent of his last drawn salary from the CPF at age 65.

Mr Ng, who is pursuing his doctorate in social policy at the London School of Economics, questioned if this was enough, as other countries seemed to hit 50 per cent or more through their pension schemes.

Mr Ng's paper showed that 68 per cent of annual CPF contribution is spent on housing, while health took up 18 per cent and pensions 14 per cent.

Debating it were Minister for Community Development, Youth and Sports Vivian Balakrishnan and Dr Lee Soon Ann, senior fellow at the department of economics at NUS. Dr Balakrishnan took the point there was no perfect balance to how CPF should be spent, but noted that Singaporeans had 'by and large got it right so far'.

As to whether the payout was enough, he said one should not discount the equity tied up in housing. There are schemes which allow Singaporeans to sublet their homes or downsize for cash, letting them 'extract liquidity out of equity', he said.

Monday, March 29, 2010

UPDATE: There's actually a YouTube video of PM Lee explaining what the govt is trying to do:

Read the article below on how the govt plans to 'tie a person's CPF to the purchase and sale of flats'. There is plenty of euphemistic language including this 'the government wants to strengthen the CPF route in the buying and selling of flats'. What it is say is simply the govt is looking at plans to require sellers to return all (or most of) money from the sale of HDB flats to CPF including profits in excess of what was withdrawn from CPF. What you can take out of a sale is likely to be the cash (+some interest) you use to service your loan. We will probably see more details soon.

The main reason given for this change is :

"It is a growing trend that has got authorities concerned: Home-owners selling HDB flats to pay off debts, only then to ask their MP for help in getting a rental unit." - PM LeeFirst of all, how many people are actually doing this? Why are they doing this? If there are many, isn't the bigger problem indebtness rather than PAP MP's problem of helping people to apply for rental flats?

I'm not sure if you remember this but a year ago, I posted a clip from 93.8Live programme about long queues for rental flats (waiting time 4 years). One person called to say that he had to sell his flat to pay for his debts. After he did that he didn't have much left and was still in bad shape financially so he applied for rental flats but had application rejected "because he had recently sold a flat". There are already all sorts of rules in place to reject applications for rental flat- in this case the person probably needed a rental flat badly but was rejected anyway.

In Singapore, there is no social safety net for those who lose their jobs, fall seriously ill or have an accident. Many are forced by circumstances beyond their control to borrow. Besides the banks, our GLCs have gotten into the act of providing unsecured loans - SingPost (with GE Money called EzyCash)...even NTUC have gotten into this business with something known as Smart Credit. A few days ago while I was at a SingPost branch, I saw 3 applicants at the EzyCash counter - one of them brought his wife and child along. When the loan officer asked him why he needed to borrow, he said his mother has been hospitalised and he needed the money urgently. We know the demand for these unsecured loans is very high - credit card rollover debt is about $4B ($3.3B in end 2008[Link], $3.6B in end 2009). The unsecured non-credit card debt is probably higher because the interest on those are about 17% compared with 24% on credit cards so people start to rollover their credit card debt only when they max out their unsecured loans. Banks promote these loans aggressively - you see the ads at MRT stations, telemarkets call frequently and they advertise frequently on the newspapers.

When the unsecured debt mounts, the borrower pays a hefty interest which is great for bank profits but strains the individual financially. When this happens, the most prudent thing a person in debt should and can do is sell his HDB flats to clear the debts so that he can start over again, hopefully without meeting any personal misfortune that forces him to borrow. Without the ability to raise some cash with his HDB flat, he will be enslaved by the loan and that will be highly detrimental for him in the long run.

"When you're not so old, and you've bought the house, and now you see that the pot of gold is down there and you ignore the 'please don't break the glass sign' and you break the glass and take the money out straightaway, then what happens to you? Or more importantly, your children and your dependents? Where do they go?" - PM Lee

People in debt will eventually lose their homes if they get sick or lose their jobs. Prevent people from settling their debts will result in them carrying a heavy debt burden compounded by ridiculous interest rates over a long period of time. It just doesn't make sense that PM Lee sees the solution to people selling their flats to pay their debt is to lock up the money in the CPF so they can't touch it when they actually need it to give themselves better odds going ahead. Why do the solutions to so many problems involve locking up more money in the CPF for longer and longer periods?......

Govt to explore ways to increase use of CPF for buying HDB flatsSINGAPORE: The government is exploring how it can further tie a person's CPF to the purchase and sale of an HDB flat. The aim is to strengthen the message that property is an asset for one's old age. Prime Minister Lee Hsien Loong said this at a forum organised by REACH, the government's feedback unit. It is a growing trend that has got authorities concerned: Home-owners selling HDB flats to pay off debts, only then to ask their MP for help in getting a rental unit. Prime Minister Lee said this goes against the aim of these homes as assets for life. "When we help people to own a home, it's really for you for life," Mr Lee said. "When you're not so old, and you've bought the house, and now you see that the pot of gold is down there and you ignore the 'please don't break the glass sign' and you break the glass and take the money out straightaway, then what happens to you? Or more importantly, your children and your dependents? Where do they go?".

Hence, the government wants to strengthen the CPF route in the buying and selling of flats. "Like what we've been doing with the Additional Housing Grant - that grant we give you into your CPF, you can use it to buy a house," explained the Prime Minister. "If you sell the house, the money goes back into the CPF. So if you're buying another house, you can use that for another house. If you're not buying another house, the money is there for your old age." On tackling income inequality, the Prime Minister said the point was not to measure the size of the gap, but to look at how the poor can be made better off. Access to a good education and a high rate of home ownership are two of the best things the government has done. However, Mr Lee noted there are some people who will be left behind. "And my advice is, please try to help yourself. And particularly, please help your children to break out of this cycle," he said. "The government will help them, but you must help them too." Said Dr Vivian Balakrishnan, Minister for Community Development, Youth and Sports: "It's not just about dollars. It's how you deliver the dollars, how you deliver assistance so that people make the right decisions for themselves and their children. "If you were a poor person, anywhere on this planet, Singapore is the one place where you will have a roof over your head, where you will have food on the table. Even if you can't afford it, we will have meals delivered to you. You will get healthcare. "Do not lose sight of the fundamentals. And I am confident that we have done our duty for the people who need our help." The hour-long dialogue also saw questions on the teaching of the Chinese language, and more help for singles. In response to a question on casino entry fees, Mr Lee said the aim was not to prevent Singaporeans and permanent residents from gambling. He added that gambling was not harmful if seen as a form of entertainment, but it does become a concern when people get addicted. The dialogue session is part of a forum on securing Singapore's future. - CNA/yb

Saturday, March 27, 2010

FURTHER UPDATE 6:20am 10 Feb 2010 - Markets have rebounded sharply since I posted this last Friday. Based on my models, they market will rally until May 2010 before it sees another correction. After that we will see one last peak in Aug 2010 before a more sinister downturn - you should get out in May or Aug...really! If you look through the recent "noise", the economic numbers and corporate earnings have been very good. In previous posts, I said that the closest "matching" and similar rally to this one is the 2003-2004 rally. For the next few months, I believe blue chips will show much greater strength than poorer quality stocks compared with the runup of past few months. In the next few days, you will see bad news suddenly moving to the background (surprise..surprise) and good news being played up ...investors will return with enthusiasm as if the last 3 weeks never happen!

Despite the huge scares on the stock market in Feb 2010 due to the Greek debt and inflation fears, the market rebounded and are hitting new 52-week highs around the world. Many analysts are warning that the market has gone ahead of itself and urging investors to be cautious and technical analysts lament the lack of volume in the markets and the VIX (volatility index) hitting new lows signalling complacency. I have a completely different view from them - when has markets rationally discounted fundamentals and reality reliably? Despite the widespread warnings by pundits on the market, and serious worries that the market is due for a selloff (soon , say like next week!), I believe things will turn out different. But before I get on to put forth a summary of my thoughts, I want to say I'm not a professional and you should take what I do with a pinch of salt.

The market often makes fools of those who try to predict it. Indeed most of the time, it behave unpredictably in a random manner like Brownian Motion - the Efficient Market Hypothesis. However, we are not in usual times post-financial crisis and there are a number of things I noticed and I'll put some of them in this posting to explain what I see in the coming months.

The chart above shows the Baltic Dry Index[Link] BDI. The BDI shows the price index of shipping costs of raw material. The index is non-speculative in nature and frequently used by economists to indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers. It shows that while demand has firmed, it is nowhere near the what it was in 2008. In a speech by Premier Wen a few weeks ago at China People's Congress, he spoke of the risk of double dip recession[Link]. It really becomes quite tricky for China as they are seeing inflation due to their massive stimulus but insufficient export growth to maintain GDP growth. Jim Jubak's recent column talks about this problem of galloping inflation in developing countries & tenuous anaemic growth in developed (western) economies.

A few months ago, I wrote this rally is liquidity driven and will rally against bad news on the economic front. As this rally is driven by liqudity, it doesn't matter how good the economic news gets once the liquidity is shutoff (interest rates rise, monetary policy tightens), the stock market rally will end. I won't go through all the details because there is a lot of statistical data I go through and some amount of modelling that I do in my spare time - a lot of relates to how much leverage traders have taken either on carry trades or margin trades. Here is what I believe will happen, we can revisit this later when various events on the stock market occur and I'll try to find some time to explain how these results were obtained:

1. Despite naysayers saying this is a market is 'double topping' (the first top was in the early Feb and we are at the 2nd top and poised for a fall), there is enough liquidity to drive this market higher. In fact, I believe the market will rise and the rate of rise will increase.

2. The market will peak in mid-May 2010 (12 May 2010 as the best estimate) and fall abruptly.

3. It will fall until roughly the 1st week of July 2010 before it attempts to rebound and peak in the last week of Aug 2010. This 2nd peak may or may not be higher than May peak will mark the end of this rally.

I would be selling off most of my stocks in May 2010 and that will be the end of my financial adventure that lasted for more than a year. We can come back to revist this post in the later part of May. My models should have greater visibility on (3). The forecast are based on market liquidity and cannot take into events like 911 that throw things completely off. Other issues like European debt will fall into the background and based on initial jobless claim figure we should see the single most worrying economic issue that of 'jobless recovery' start easing, that will help to propel this market higher...driven by ample liquidity in the system and to its peak by drawing money at the side waiting for the economic picture to turn for the better....

Friday, March 26, 2010

"Now when Jesus heard these things, he said unto him, Yet lackest thou one thing: sell all that thou hast, and distribute unto the poor, and thou shalt have treasure in heaven: and come, follow me. " - Luke 18:22

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When I was in secondary school, I helped out at a Christian charity. I was not a Christian but the Christians in the group liked me so much, they made me their student rep. As the rep, I had to attend workshops, seminars, organise activities etc. What was deeply etched in my mind was the idea of helping the poor and distributing (all) your wealth which was so much a key part of the religion. Distributing ....not accumulating.

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I guess these days things have changed somewhat. New style churches collect tens of millions, invest hundreds of millions in real estate deals including shopping centers & restaurants[Link] and start to look like business enterprises. How much goes to charity?

City Harvest is now involved in $310M real estate deal [Link]. They are not building a shelter for the homeless or hospital for the sick...

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“For Singapore Expo, we are in a lease-only business model. As such, what is being paid out does not have any returns or profit-sharing for CHC. The Board and the Building Committee discussed and concluded that with an ‘ownership-and-license’ business model, the rent we pay out will be recovered by CHC in the form of profits and dividends. It’s perfect for our church”

City Harvest Church will fund this mainly through donations from its church goers[Link]. I'm sure CHC will be able to raise the funds given its enthusiastic congregation. What they willingly give out of their own free will is none of our business - many probably consider the religious experience (joy, happiness) invaluable and they will have their spirits elevated to a high every weekend by inpiring sermons. The issue really is it is registered as a charity and enjoys a tax-exempt status because of this. CHC, however, pays out 3 times more as salaries to its staff than it gives to charity. These days it is impractical to expect religious leaders to live in modest homes and take public transport and honour a vow of poverty so they can give out more to those who are poor and sick knowing that what is important are the treasures that await them in heaven...we should, however, have the same level of transparency, accountability and regulation as big business enterprises because some of these mega-churches operate like businesses.

Thursday, March 25, 2010

In a recent parliament speech, Minister Mah spoke again about HDB flats being 'affordable'. To support his assertion he gave a few examples to illustrate what affordable means:

"In the case of new HDB flats in non-mature estates, theaverage mortgage payment for new flats in non-mature estates sold in 2009 was 22% of monthly household income, which translates to a DSR of 22%. This is 1-2% marginally higher than the level seen in the last decade, but well within the affordability benchmark of 30-35%. This also means that about 80% of Singaporean new flat buyers are able to service their housing loans entirely from CPF without any cash payment. In my opinion, this is a significant fact and a very real measure of affordability" - Minister Mah's Speech in Parliament 5 March 2010[Link].

Do go through the other examples in his speech to fully understand what he means by affordability. He is basically saying if you can service your 30 yr mortgage loan today, things are okay...the HDB has done its job well and there are no real issues here. You noticed he used 'average' mortgage payment ...hmm so what happens to the 500,000 families who are below average? What happens to the bottom 20-30% where income has fallen off steeply due to the income gap? Public housing is for everyone right? Not just the average and above average families. His choice of using the average to demonstrate affordability is just a small spin ....I'll show you why this whole affordability argument from Minister Mah is bogus. Our public housing is the most expensive in the world and it causes Singaporean households to be deep in debt putting them at risk - 8% of HDB loans were in default in late 2008 even before the recession started[Link:HDB Mortgage Defaults Up 33,000 in October]. The need to service a debt over 3 decades make Singaporean households financially vulnerable - but there is something that make such loans even more dangerous......

How did people buy homes in the past anyway? My grandfather his home by leasing a piece of land from a landlord and he paid a house builder to build the attap house. I lived in it for 15 years - my grandpa was a baker, he had 6 children and never spent one day in debt. My father bought his HDB 4 room HDB flat in the early 80s. Those days HDB build 4 room flats the size of an $800K-$900K condo today. My dad paid of his housing debt in 7 years. His CPF was intact because they did not allow CPF to be used for housing in those days. Some time in the later half of the 1980s the CPF was liberalised for use in housing and this was what happened:

The surge in property prices was caused by the CPF liberalisation (according to this research paper[Link]. The housing loans to GNP ratio went up from 0.1 in 1980 to a whopping 0.49 in 1997 [Link]- a 500% jump! So CPF was emptied for purpose of buying homes and households became highly indebted - now housing becomes intertwined with retirement.

...Some of you may be asking what is wrong with debt anyway? You have a steady job, you make more than enough to cover your monthly instalments ...so what is the big deal about borrowing $300K to buy a flat or $500K to buy a condo if you're making $5-8K a month...30 yrs later you will be off the hook and along the way there is a good chance you can off-load to some other person for a profit of $100-200K if the timing is right. What is the problem...everyone else is doing it anyway....besides job loss, falling prices, illness, etc, there is something sinister I find most young people don't take into account when they take up, say, a $500K loan - its seems so routine these days given the high cost of housing....let me tell you a story...

Late 1998 during the Asian crisis, prices for property fell and I was persuaded to buy one. After I selected my property and booked it, I went around to shop for a loan. I found a bank advertising an 'unbelievably low rate of interest'. The offer was so good, the bank kept its doors opened on Saturday to deal with surge in loan applications. I went to the bank very early but found a long queue of people ahead of me. I waited for 5 hours before my turn. When the officer saw me, she said, "Mister, this type of good deal for housing loan you will probably never see again in your lifetime". So what was this good deal? The bank was offering an interest rate of 5.25% for housing loans - the lowest in recent years. Many people today taking up housing loans forget that the 3-4% housing loan interest we see now is artificially low and not the norm if you look at interest rates in the past 3 decades. During the Asian crisis, housing loan interest rates went up to 8% i.e. if you have a housing loan of $500K you will be paying $40K a year or $3.3K a month on interest along without reduction in principal. One of my friend paid close to $200K in total instalments to service a $700K housing loan in 1996-1998 only to see the principal fall by $50K as interest ranged from 5.5-8% during that period.

Talking a 30 year loan is not a trivial thing - during the 30 years, many things can happen include the high likelihood of interest rates going up, job loss, illness, etc and Minister Mah is incorrect to say it is affordable and okay for people to take up these loans when we were already seeing a default rate of 8% in 2008 when the interest rate and job environment was relatively benign. Debt = risk and a public housing program that requires buyers to take up 30 yr mortgages to stretch their loan so they can afford the month instalments puts the ordinary people at risk while it maximises the govt revenue by putting heavy burdens on Singaporean households.

Wednesday, March 24, 2010

UPDATE: One commenter correctly pointed out that the COE quotas have not be reduced yet. The surge is due to anticipation that number of COEs will be cut next month. Wonder how much more it will surge when the cuts actually take place...

LTA will reduce the number of COEs by roughly 30% [Link] for next month. Don't worry, our govt is not going to collect less money because they cut the supply of COE because the price of each COE has gone up by more than 30% for all categories:

CERTIFICATE of entitlement (COE) premiums in the latest tender on Wednesday spiralled northwards by more than $10,000 - a quantum leap unheard of since the 1990s. Following news that supply will shrink drastically, bidders sent COEs to new highs. Premium for cars up to 1,600cc climbed by about $7,500 to $28,389. The rate for cars above 1,600cc was up by nearly $10,000 to $36,089. Open COE, which can be used for any vehicle type but ends up usually for cars, skyrocketted to $42,001 - more than $14,000 above its previous level two weeks ago. Even the commercial vehicle COE ended dramatically higher. It closed at $32,890, nearly $6,000 more than before. Motorcycle COE was the only one that chalked a modest increase - of about $40 to close at $1,200. Observers said the supply shrinkage starting from next month spooked motor traders, sparking the rush for COEs. They also noted that speculators are back in force, driving premiums up further. Vincent Ng, product manager of Honda agent Kah Motor, said the sharp increases were 'definitely because of dealers of luxury cars', who have fatter margins than others. 'They have to have COEs in hand to sell cars,' he said. 'And speculators are also back.'

Interesting report about the casino below : Better business for pawn shops as customers raise quick cash for gambling.

When the PAP govt proposed to build those casinos, it was sold to the public as a way of 'creating jobs'. In the past few months netizens through various blogs, newspaper reports, foreign job advertisements etc found out a large proportion of the jobs went to foreigners. Later the govt through the MSM released some more favorable but confusing figures on the job numbers saying that more 'locals' (PR+citizens) have been hired at the casino. But this whole jobs argument has been a red herring. Why do I say that? Singapore now imports more than 30% of its workforce to fill jobs....the Singapore economy creates so many jobs it needs to import workers. Job creation and low employment were never the real issue. The real issue is salary. It is not job creation but the type of jobs and whether our income levels rise fast enough to pay for the rising cost of living - housing, medical care, food, utilities and transport. There is not much point to create another 1000 cleaner jobs for Singaporeans at the casinos ...card dealer jobs that pay $1200 a month?

The other day I was at Parkway Parade and a property agent walked up to me to sell units at a newly launched condo near Marine Parade. The cheapest unit $900K ...$1.8M for the penthouse. The agent said, no problem renting out because the executives at the IR are all highly paid foreigners and will be looking for rental apartments in the east. It is not whether the casino creates jobs but whether Singaporeans can earn higher salaries because of the casinos....so far I've only heard of people losing their salaries there!

The benefits of the casinos for Singaporeans are not so clear but the social problems caused by casinos are very real. Prostitution, loan sharking and gambling addiction are now on the rise due to those casinos.-----------Better business for pawn shops as customers raise quick cash for gambling 23 March 2010 / CNA SINGAPORE: The opening of the casino in Singapore has led to better business for some pawn shops. Pawn shops said they are seeing more customers, especially older folks, who said they are pawning their valuables to raise cash for gambling. While the number of such customers is small, pawn shop owners said it will rise in the coming months. However, some industry players have expressed concern. They feel pawn-broking is meant to help people tide over urgent times, rather than a means to raise quick cash. - CNA/yb

Tuesday, March 23, 2010

So what is the aftermath of big corporations taking over the wet markets and monopolising them? Rent increase, of course, just as I wrote in part 1. However, I never guessed that they will hike rents by a whopping 30%. If govt lack the common sense to prevent monopolistic and anti-competitive behavior this is what will happen : customers end up paying more and stall holders lose part of their income due to rent hikes.

The stallholder who wakes up in the wee hours of the morning to set up his stall and works long hours now has to work harder to make up for the higher rent which the corporation just sits around to collect. ...hmmm our govt's idea of work for cheaper and faster....

Stallholders at five wet markets will have to pay 30 per cent more in rent from next month. They have been informed of the increase by supermarket chain Sheng Siong, which bought the markets over from a private property developer late last year. The five wet markets are in Choa Chu Kang, Bukit Batok and Serangoon. Currently, they pay about S$2,000 to S$3,000 in rent. Many stallholders feel that the 30-per-cent increase is too high, and a few said they may even give up their businesses. Some are thinking of passing the costs to customers but are also worried that this would hurt businesses, especially in the face of competition from other wet markets and supermarkets. Sheng Siong said it had no choice but to increase rental rates, as it had to pay bank interest fees, property tax and maintenance fees after buying over the five wet markets for about S$25 million. - CNA/yb

Sunday, March 21, 2010

UPDATE: The US health care reform has been passed. Americans will now get health care as a right and health care will become universal in the US. So guess which is the country now with the largest number of uninsured per capita in the developed world? Which is the country with the least universal health care in the developed world? .....

This bitter fight is nearing its end as the US House of Representatives is scheduled to vote for it later today. The last effort to reform this system was undertaken 17 years ago by Hillary Clinton when she was the First Lady. Her reform effort was quickly killed off by lobbyists, big businesses spending on ads to misinform the public and political opponents with ideological differences[Link]. 17 years later, the US health care system deteriorated to a point that almost everyone agrees there is a need for reform. What they can't agree on is how and what to reform. The main problem is the lack of universality of the system - 30 million Americans have no insurance. If you take away all the misinformation (Obama-care is socialist, healthcare is being nationalised, it will bankrupt the country etc) and all details about increasing overall efficiency what this reform is about is simply the extending provision of healthcare coverage to everyone paid for by increasing the tax of those earning more than US$250,000 by roughly 3% and not extending some of the tax cuts by President Bush. According to the Congressional Budget Office which is politically neutral, the entire package will reduce budget deficit by $138B in the next 10 years[Link] so the belief that this bill will bankrupt the country is the result of misinformation - the Iraq War that cost more than $1 trillion and the Bush tax cuts pushed the US govt deep into debt did not see strong protests by this bunch who have turned into fiscal conservatives to oppose the healthcare bill. The genuine opposition is on the issue of whether richer Americans should pay slightly higher taxes to cover the poor. In countries like France, UK, they have chosen the other extreme making healthcare completely free. France has the number 1 healthcare system in the world. Some countries like Australia & Taiwan do something in between - everyone pays for insurance but the richer citizens pay more and the govt pays for the poor to make sure everyone is covered. Obama's health care reform steers America's system only slightly to the left but is strongly opposed by the Republicans - not a single one will support this bill for political and philosophical reasons. Increasing taxes to help the poor (and sick) is wrong....uncapitalistic? and everyone should be responsible for himself. However, at a time when income gap is the highest in the last 100 years and health care cost rising much faster than income not everyone is can be responsible for himself medically. There is only one other developed country that leans further to the right and put more financial burden (as a % of total expenditure) on the sick than USA....so far no Republican has dared to ask an American to go to Mexico to get cheaper health care.

Yesterday, the New Paper reported a cabby who saved $6K by going to Malaysia for an operation[ New Paper Link :here]:

He saves $6,500 by doing op in JB By Ng Wan Ching

March 20, 2010

A Singaporean cabby is one of the first Singaporeans to go to Malaysia for medical treatment, after the use of Medisave has been allowed for elective hospitalisation overseas from 1 Mar.

Mr Ali Ahmed has undergone a procedure called a laminectomy in Regency Specialist Hospital in Johor Baru with a Singaporean doctor.

His total bill will be $7,050, which includes surgery, meals and a five-day stay in a single deluxe room at the JB hospital, which is air-conditioned, with an en-suite bathroom, a telephone and a flat-screen TV.

He would have saved another $1,000 if he had opted for a Malaysian doctor. Accurate figures cannot be quoted because the cost depends on the Malaysian doctor.

For an equivalent stay and single room in a restructured hospital here, he would have had to pay $13,500.

For the operation in JB, Mr Ali can claim $5,150 from his Medisave. The rest he has to pay for himself as MediShield insurance cannot be claimed for treatment at overseas."

Mr. Ali is a cab driver. He is not poor enough to qualify for Medifund (you really have to have nothing to get some of this...absolute poverty!). The subsidy given out by the govt is does not even bring the cost of his operation at a Singapore govt hospital to the ball park of the cost of private for profit treatment in JB. Mr. Ali whom I guess is unimsured (like the other hundreds of thousands of Singaporeans) did the sensible thing of going to JB to save some money....

At a time when medical inflation outstrips rise in wages and when the benefits of our economic growth is distributed in the most unequal manner in our history causing our income gap to be the highest in developed countries, the PAP govt worsens all this by shifting more financial burden of medical treatment to sick Singaporeans and their families. This is seen from the reduction of healthcare subsidies over time. The goal of turning Singapore into a medical hub for the rich in the region means that an increase part of our health care system is turned into for profit private enterprises (Parkway, Healthway, etc) to cater to whoever is willing to pay the highest price and this drives costs up- Singapore has close to 1M medical tourists and Singaporeans like Mr. Ali have to go overseas to seek medical care. Singaporeans shoulder the most in terms of % health expediture than all other countries even more than Americans whose system is considered so broken they are in need of reform.

Obama's argument is simple - at the end of the day you either believe everyone has a right to good medical care in his country or you don't. If you do, you make it happen even if it means higher taxes for some people in the country. At the end of the day, it is about getting one step closer to an ideal called equality. Obama and Americans have to make a painful choice because the country is feeling the fiscal strain of the crisis and years of irresponsibility by an earlier govt. Here in Singapore we have had more choices - that 2% GST increase which went towards corporate tax cuts would have gone a long way to help the sick if the govt wanted to. But it does not want to...it believes in raising burden for the sick so that it can keep cutting taxes for corporations and the rich (inheritance tax was eliminated last year) even as our income gap keeps rising and corporate profits as a % of GDP is at historic highs. The recent move to get Singaporeans to go to JB and the hospital bed crunch[Link] are the results of PAP's policies to keep govt expenditure down even as costs rise by increasing the burden of ordinary Singaporeans who get sick.

Tuesday, March 16, 2010

"Why did I go back? Why? Because it's important. It's the collapse of capitalism and the collapse of our society. It is. Our way of life is going to change."

- Oliver Stone on why he made the sequel to his blockbuster "Wall Street"[Link]

There is an extremely interesting book called "Debt and Delusion" by Peter Warburton about the failure of the current economic system brought about by an increased level of debt[Link]. Warburton wrote about how unchecked credit expansion creation through the issuance of bonds, securitization and central bank actions has led to an unsustainable illusion of personal wealth and national prosperity. This would be "just another book" about the recent financial crisis written to jump on the bandwagon of fear and uncertainty except that it was written in the year 2000 when the global economy appeared to be in great shape. Warburton was able to see through the illusion of wealth to write this prophetic book. The last part of the book talked about how central banks will try to monetize debt when the collapse starts to delay the day of reckoning but the attempt to shore up the system will prove futile....I believe there is a good chance that Warburton will be proven right.

“A great book to read about this present generation’s massive debt is a book by Peter Warburton called Debt & Delusion. It’s a little dry at times, but ... there are some great points that Peter makes about how Western Civilization has become too dependent on debt.” (David N. Vaughn, Gold Letter, Inc., February 6, 2004)

You ever wonder how property prices rise? In a healthy market, property prices rise with the general increase in household income. When the property prices rise faster than income for an extended period of time, the average debt taken up by a household for purchase of property has to increase to support the rising prices. Rising debt in some ways give an illusion of prosperity on the way up. So Singaporean's wealth in the form of property depends on future generation's willingness to take on ever higher levels of debt to buy the property from us. MM Lee warned that if the GDP does not keep growing, our property prices will fall and our wealth will vanish! Singaporeans have about 50% of their wealth invested in residential property[Link] and wealth depends on the amount of debt buyers are willing to shoulder in the future. Packing more and more people onto this little island is one sure way of forcing prices up by getting more people willing to shoulder the heavier debt.

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The next crisis whenever it may be ...might as what Oliver Stone said change our way of life. People may start to view debt in a different light rejecting the idea of 30 year mortgages as slavery and our 'property wealth' can simply disappear and the little PAP magic trick of asset enhancement operates in reverse fashion to take many of us back to poverty.

Wednesday, March 10, 2010

Have been very busy these few days so I haven't had time to blog. I will continue to be busy until the middle of next week, Things should go back to normal for me towards the end of next week.

Tiger Woods, Jack Neo, a Malaysian minister and an American president.....

When I just started working, I socialised a lot more than I do now. At a barbeque organised by a friend where many people turned up and a small group of us started discussing about short trip to KL- we decided travel cheap to KL taking a bus from JB instead of booking a bus from Singapore. There were 5 of us - 2 guys and 3 girls. I went because I had nothing else better to do for that weekend. I hardly knew the people I was going with because I met some of them for the 1st time at the barbeque. When we got to KL, one of the girls requested for her own room while the guys shared one room and the other girls shared another. We found out later that the girl wanted her own room because she was meeting her lover, a married businessman. The next day the businessman joined us for breakfast - he probably assumed since we were all strangers and won't rat on him. Other than the fact that he was cheating on his wife, he was a like any other guy - friendly, confident and courteous. While it is considered wrong and immoral to cheat on your spouse or girlfriend, over time I realised this behavior is more widespread that most people think. Singaporeans don't like to rat on other people's private life - notice how the other parts of Jack Neo's scandal popped out in quick succession only after his 22 yr old mistress spilled the beans on him - many were helping him to keep things secret for a long time. Why do people cheat on their spouse when it so damaging if you're found out?

Human beings are polygamous by nature (Polygamy left its mark on the human genome). It was a matter of survival in the past when living conditions were extremely harsh. Genetically, you're better off "sowing your wild oats" than forming stable families. However, as we become more civilised and organised as a society, and learn to overcome the forces of nature, this behavior became unnecessary and incompatible with the social structures that evolved over time. To repress this behavior, laws, religion and social norms (morality) were imposed on the people. Many find it hard to overcome this behavior pre-programmed in our genes despite the fear of being found out, promises to their spouses and damage to their reputation. Take Bill Clinton as an example. Here is a guy who had everything going for him and plenty of political enemies waiting for one mistake to tear him down - yet he couldn't overcome his 'lust' and nearly destroyed his presidency.

40 years ago, perhaps it was easier to constrain human behavior - movies were sexually tame, no Internet, no social networks, and fewer bad role models. Today, Hollywood actors, sports heros, and playboy billionaires have taken over as role models for many of our youths. This is counter-balanced by rising religiosity- the emergence of megachurches....Jack Neo was with his pastor when the scandal broke, Tiger Woods spoke about returning to his Buddhist roots. For the successful who have more than provided for their family, it becomes harder to resist infidelity given they have time, money and easy women who are attracted to their success. However, infidelity is bad for our society as causes families to break up and broken homes lead to problematic childhoods for the kids[Broken homes, broken children?]. We are always disappointed when famous people held up as role models are found to be less than perfect. While we have the right to be upset given we have been sold a deceptive unreal facade of the actual character, we also have to ask ourselves if why we have formed unrealistic expectations knowing that famous people today manage their public image with professional PR and spin. Jack Neo was wrong to cheat on his wife and will pay for it with his reputation and he will be painfully humiliated and prosecuted by the media. We should not condemn him without mercy ...and although I'm not a Christian, there wisdom in these words from the bible : "Let those without sin cast the first stone". We are all imperfect in our own way ....as for Jack Neo's transgressions, his wife and children are the only ones who needs to forgive him.

Friday, March 05, 2010

When they talk about increasing productivity, it always about how the Singaporean worker should work harder and better. The poor Singapore elderly cleaner should be more efficent and work faster otherwise he should be replaced by a young foreign according to MP Ong Ah Heng - that was what he did to old cleaners after a single complaint from his residents.

“I know of one family who complain the cleaners in their precinct are lazy and too old. They don’t want local workers who are old, they want young foreign workers. To satisfy the demand, I changed the local workers to foreign workers. Foreign workers are not a burden to us. Their presence here is not negative. Without foreign workers, things will be worse,” - MP Ong Ah Heng in Parliament.

Yes, even when you're in your seventies, you should be as fast and as nimble as the 20 year old from China that is what the PAP govt expects of you otherwise you don't have spurs in your hide and will be seen as lazy. It is interesting that MP Ong chooses to use cleaners who are paid $800 a month to illustrate his point ....Before I go on to the points I'll be making, let me ask you a simple question : how productive was President Nathan last year to deserve his $3M paycheck? Let us not fall into this trap - that our well being is linked to our productivity and if we have not been paid well it is we haven't been productive enough....

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Kenneth Feinberg[Link] is Obama's "pay czar". After the US govt bailed out major banks, Fienberg was appointed to make sure bankers don't go back to their old bad habits of paying themselves tens of millions given the outrage among the general public for the bailout. Yesterday Fienberg appeared on CNBC because Maria Bartiromo was doing a segment on Wells Fargo executives wanting to double their own pay. Because Wells Fargo had already returned the TARP money, Feinberg has no juristriction over them and can't do anything about it - all he could do was give his opinion on the matter. This was what he said. Very often bankers would come to him to authorise fat bonuses or pay hikes saying that the executive is "especially talented" or he might be poached up by a foreign bank. He would ask for proof this "talent" and in every single case he found the person replaceable without loss to the company. It was mostly, in his own words,"spin" - bankers over the years have been very creative at manufacturing justifications for their high salaries even as they were about to cause a lot of economic pain to the rest of the population through their careless lending. Buffett asked why the CEO pay has gone from 50 times the lowest paid worker in the company in the 1950s to 500 then to 5000 times - is the CEO today 100 times more productive today? Not possible.

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When the issue of Singapore's competitiveness surfaced again this year, our leaders cited as examples how waitresses at restaurants can be more productive, our $800 a month aged cleaners should work faster and harder, etc They have implicitly put the burden of competitiveness on the shoulders of ordinary Singaporeans - calling upon the lowly salary earners to gear up ...upskill, reskill, multi-skill, (Lim Swee Say has shown many skills to earn his millions?). Singapore has the highest income inequality in the developed world with the highest income earners forming a disproportionate amount of the cost in our system. We shouldn't be worried whether the $800 a month cleaner has done enough to deserve his pay - we should be asking what President Nathan has achieved last year to get his $3M. Are our ministers productive?..Are they multi-skilled? Have our bankers monopolised the NETS payment system and are making easy money by charging for every NETS electronic transaction? Should anti-trust regulation be used on them? Does the SMRT CEO who is granted a monopoly to operate our trains deserve her millions for squeezing us like cattle during the rush hour? Why is the burden of competition put on ordinary Singaporeans yet again? Why isn't anyone asking if we can be more competitive by slashing govt fees, cost of services provided by state own monopolies, etc. Scrutizing the performance of our cleaners, factory workers, waitresses and the ordinary Singaporeans and asking them to be cheaper, better, faster is going to do little for our competitveness when the fat unproductive over-compensated segment of our economy drives up our costs.

Thursday, March 04, 2010

Sylvia Lim raised important points that I've written about in this blog very well:

Whatever economic strategy or growth pursued by the govt, it has to improve the quality of life of ordinary Singaporeans.

In recent years, profits as a share of GDP has risen to 45%

GDP may not be a good measure of economic performance and social progress.

Growing inequality in our society is a serious problem.

The massive import of foreign labor has lead to stresses and problems. The idea that we have to expand population to be competitive may be flawed.

A few weeks ago I wrote that the ESC report did not put the improving the quality of life of Singaporeans as its ultimate goal. The goal of the ESC was to achieve GDP growth (didn't we already accomplish that in the past few decades) and this may not lead to a rise in living standards of ordinary Singaporeans. The PAP fixation with GDP growth has led to the worse income inequality in developed countries and a increased pace of life that many Singaporeans now find difficult to cope with. However, it will be difficult for the PAP to change and put the well being of ordinary Singaporeans as its top priority - over the years its other interests have grown, it now has a vast network of GLCs to take care of and the GLCs serve to benefit a small number of elites who occupy top positions and are closely linked to PAP.

Wednesday, March 03, 2010

Before I get on to the actual topic, let me ask you a question. Do you know how they operate ferris wheels in some parts of India? Here's how:

Yes, human powered ferris wheels.....found only in places where you can pay people less than $1 a day for their labor.

See when businesses have access to very cheap labor they stop investing in machines, software and processes to improve productivity. That what economists looking at our productivity growth's correlation with foreign imported labor numbers will tell you. However, this simple conclusion also it means that PAP govt has made a serious mistake to open the floodgates to cheap foreign labor causing a decline in worker productivity. However, if you look at the speeches by the SM and PM, they put the responsibility of increasing productivity on the shoulders of Singapore workers and businesses. If workers and businesses can't improve their productivity, Singapore will have no choice but to continue importing foreign workers. The PAP govt has never admitted that its liberal foreign labor policy CAUSED a fall in productivity.... so it was left to MP Low to fire his salvo at the govt and put the blame for productivity decline directly on govt foreign labor policy :

The Singapore worker can train, retrain, upgrade all he wants but if companies have access to cheap labor like ferris wheel operators in India, they will never buy machines that will make full use of the skills of the Singaporean worker. That is why in Japan which uses almost exclusively more expensive local labor has a productivity index of 100 compared with 50 for Singapore. By saying that Singapore needs to improve productivity to decrease reliance on foreign workers, the govt has reversed the real cause and effect i.e. the govt is saying our reliance on foreign workers is caused by our declining productivity. The 1st step to fixing a problem is to admit that a mistake has been made. MP Low's speech in parliament only elicited denials from the PAP side...so I'm not optimistic the PAP will adopt the right approach to improve the lot of our workers.

Tuesday, March 02, 2010

We were once told that our top leadership had something rare called 'helicopter vision', a term used to describe their abilities as super visionaries able to see far beyond what ordinary Singaporeans can. During the debate on minister's pay, it was argued that they were extraordinary men who made a painful sacrifice to serve the people for a mere couple of millions. What we actually saw in the past 3-4 years was leadership that had problems acknowledging the problems of ordinary Singaporeans let alone solve them. When HDB flats rose sharply, they kept insisting that it was still affordable instead doing something about the supply. When ordinary Singaporeans raised the problems of overcrowded public transport during peak hours, they again denied there were any problems - it was netizens who diligently analysed the situation to show that there was a massive rise in population without corresponding increase in capacity.

They pursued a short term strategy for generating economic growth by importing foreign labor exacerbating our society's most serious problem - income inequality. Thousands of Singapore households have fallen into poverty and we are beginning to see homelessness among Singaporeans. We do not just have a bad income gap problem, we have the WORSE income gap among developed countries (bar chart from Online Citizen):

The income gap is not a new problem - it has been around for more than a decade. However, instead of implementing measures to help narrow the gap such as minimum wages and safety nets, they implemented policies that worsened the situation - liberal immigration policies, regressive taxation (GST) and reduction of workers' benefits. We are not only seeing rising poverty but the emergence of an ultra-underclass among us.

As citizens, we cannot continue to wait and hope that the govt will start to do something about the problems we face. The PAP govt with its diversified interests (GLCs etc) rarely put the well- being of ordinary Singaporeans at heart of policy making..... what we have are healthcare policies that shift as much burden to the sick and families of the sick, labor policy that tells Singaporean workers to make themselves cheaper (, better, faster) and imports foreign workers excessively to keep wages down, transport policies that generates more revenue as congestion worsens and costly public housing that results in a lifetime of debt for young couples.

We cannot allow our thoughts to be shaped by the govt controlled media and our votes to be bought by estate upgrading. We cannot depend on the PAP to overcome its ideological constraints and reliance on old tired formulas for change while our fellow Singaporeans struggle to make ends meet. These leaders who demand millions cannot even understand the problems Singaporeans have to struggle with day after day. At the end of the day what is needed from them is what money cannot buy - real integrity, empathy, care, respect and humility.

The other day SM Goh gave a speech in which he said our leaders need to be tough and not 'strawberries'. Who can be tougher than people who kept coming back with their heads held high after they were jailed and bankrupted for their determination to do what is right. Who is tougher than the man risks everything to stand up in a climate of fear to speak against what is wrong in our society.

Monday, March 01, 2010

In June 2008, Straits Times published an article that told us Chee may be me suffering from "anti-social personality disorder"[Link] - this article and many others over the years attempted to paint Chee as a suspicious character from the political fringe. Yesterday's Sunday Times coverage of the SDP's 30th Anniversary (SDP Marks its 30th year) and Chee's ZaoBao interview[here] along with a smiling confident looking photo of him gives us the impression that something has changed in the MSM.

The article above appeared in the Straits Times today allowed Chee to clarify a number of issues - where he gets his funding and Chiam's exit from the SDP. I'm not too sure what to make of all this since the editors of the papers are still the same people and there is not yet enough evidence to be convinced that they have suddenly become completely objective in their reporting. What I don't believe is that any of this happened without careful thought and a purpose. With an unfriendly MSM, the SDP has had to harness the Internet to reach out to supporters and recruit new members. Today you can access its websites, youtube videos and its articles are replicated in numerous forums and blogs. The next election will see a younger generation born after 1965 forming more than 50% of the voters - this generation, better educated, more widely travelled and less susceptible to simple propaganda....perhaps all these factors led to a change in the MSM coverage of Chee. Tossing names at Chee like one old man did calling him "a near-psychopath" may actually backfire these days.

"Perhaps there is a tacit recognition that a bankrupted Chee is already a spent force and thus not a political threat? Perhaps Lee Kuan Yew, after clashing with the Chee siblings in court, saw for himself horns didn’t grow out of their skulls? Perhaps the political desks of ST and Zaobao needed to fill their quotas of articles per month...."

I don't think Chee is a spent force - if anything, his fight for democracy has taken on greater relevance and popularity given the tranformation that has taken place in many asian countries such as S. Korea, Taiwan, Malaysia, Indonesia etc.

Treatment of Chee by the MSM aside, there is something I found extremely disturbing in Martyn See's posting:

"Five years ago in the police station, I was interrogated by the police over the making of my documentary Singapore Rebel. Photographs and minutes of the Singapore Democratic Party’s (SDP) meetings and activities were produced in front me, and I was asked to identify faces in those snapshots. How did the photographs and minutes end up with the police? Did the police have moles planted in the opposition? Is Lee Kuan Yew an autocrat? You go figure."

If the above is true, the national intelligence agencies may have been used to spy on PAP's political opponents. This is an abuse of power - instead of hunting down Mas Selamat's buddies they have infiltrated Chee's SDP......even if there is abuse, why must they waste resources on this when MM Lee called Chee a "political juvenile" and thus not a real political threat? Is Lee Kuan Yew an autocrat? Hmmm....has there been any doubt of that!